This is probably one of the biggest questions on investors’ minds right now and one that comes up in conversation around the summer BBQ . So let’s take a look and a couple of the reasons that make us feel bullish about the markets.

In early 2012, the markets got off to a great start and we saw a steady upward climb in the first quarter. Looking the Dow Jones Industrial Average, the index gained 4.58%, while the S&P 500 during the same period was up 7.32%.

Welcome back Europe and China.

Investors began worrying once again about the financial crisis in Europe, which continuously saw Greece in the headlines and the ongoing debate of are they in, or out of the Euro. Then we started to hear of slowing growth in China. These two major macro events might drive the global economy into recession and as a result, we saw the market move on a downward march.

But after hitting bottom in early June, the markets started trending higher. Both the Dow Jones Industrial Average and S&P 500 have gained over 6% since then.

So the Question is can the markets continue to move higher?

While it is impossible to call short and long term moves in the markets, we also have to realize that there will always be things that are unknown today both economically and politically. However, there are some things that have been identified that we are bullish on.

The first reason is it appears that Europe is making real strides in dealing with their financial crisis. Last month the leaders that make up the European Union made a significant breakthrough on plans for rescuing the region’s beleaguered financial system.

While we wait for the details to be finalized, they have agreed to three main things. The first is to centralize the regulation of European banks and bail out banks directly. The second step taken was to reduce the borrowing costs on Italy and Spain, and the third area, is they agreed to stop imposing harsh budget cuts on every country in need of financial aid.

So what will this accomplish in what looks like a dire situation? It will first allow for stronger economic countries like Germany to see greater banking control and oversight, as well as a bailout mechanism that doesn’t add to a member country’s already inflated debt load. For the countries that we constantly see in the media it will allow them to obtain bailout funds without overly oppressive economic austerity measures.

The second factor that is being taken into consideration is China, and the government’s willingness to do what is necessary to boost growth. China’s growth is a key factor for the markets to see continued growth. We have always said that the US Economy is the engine that drives the train but in reality it is China’s economy that is driving the global economy right now. Just look at where the day to day products you use are made!! So if their economy isn’t growing it will be difficult for the global economy to avoid sliding into recession.

The good news is China has taken measures to spark economic growth and so far it appears to be working. Two measures that China has taken is they have lowered interest rates twice since the beginning of June and the Government has lowered bank reserve requirements three times since November.

So has this worked? Looking at recent economic data, it shows that there have been positive effects by these moves. China’s struggling property market witnessed significant gains with the value of home sales surging 41% in June compared to May. As well second quarter GDP was better than analysts expected with the economy growing by slightly more than 7.6%.

Another positive signal that these measures are starting to work is there economy saw a increase in capital investment during the first half of the year. This is important as it can have a significant impact on the Canadian Natural Resource Sector as investment in industry, infrastructure and property jumped 20.4% year over year.

The best news of all is the Chinese government has indicated they’re prepared to do whatever it takes to boost growth even further.

As I mentioned there will always be the unknown and no one has a crystal ball to predict what will happen next week or next month, but this is positive news. And let’s not forget about the US and the measure being taken there to boost growth….but that is a conversation for another column.

If you have any questions or would like a review of your current investments, please call 778-478-9759, or e-mail [email protected]

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.

Since the height of the credit crisis, finance minister Jim Flaherty has clamped down on mortgage lending. New lending rules were handed down in 2008, 2010 and in 2011. A fourth round of mortgage restrictions was announced in June and will come into effect on July 9, 2012.

The new lending rules that were announced, have been brought in to support the long term stability of the housing and mortgage markets in Canada and to promote savings through home ownership.

Starting on July 9, 2012, individuals and families with less than a 20% down payment will no longer qualify for a prime mortgage with a 30 year amortization period—the maximum will be 25 years. Reducing the amortization period will increase the monthly payment moderately but over the life of the mortgage, this small increase will result in a significant savings in interest costs.

Another major change is the amount that you will be able to refinance. The maximum amount will drop to 80% from the current 85% of the value of the home. By limiting this, it will promote an increase in savings through home ownership which is part of the government’s mandate.

It was also announced that the maximum gross debt services ratio (GDS) will go to 39% while the total debt service ratio (TDS) would be reduced to 44%. These ratios’s measure the amount of a household income that is required to service debt payments and are already used by lenders. By setting a limit on the GDS and reducing the TDS, it will help Canadian households from becoming over extended and vulnerable to interest rate hike when this happens.

If you have any questions or would like a review of your current investments, please call 778-478-9759, or e-mail [email protected]

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.

In an ever changing landscape of financial products and what retirement is, young people are encouraged to start saving early for retirement, as the obligation will fall increasingly on them to look after themselves…..

There is a big challenge ahead for parents to get their children (and maybe the parents) thinking about this as soon as possible. The feeling is that the government isn’t likely to fund larger amounts of the Canada Pension Plan (CPP) or other income supplements that people might like to have. Top that of, is the fact that there are fewer and fewer defined pension plans—those are the ones that allow people to worry less about saving for retirement.

When I look at my own family, our eldest daughter is starting her University education and someday will get married and start her own family. These life events will make it harder and harder as your income will be spread over more expenses. By developing savings habits today and as life events take place, it will be easier to adapt.

Many people look at their house as the key to their retirement plan. Keep in mind that people still need a place to live and these days fewer retirees wish to downsize. Housing prices are also a reason for retirees to stay in the family home as many areas that are sought after retirement communities such as Kelowna don’t come cheap.

A savings plan can help people diversify and gain flexibility. The family home is an excellent way to create personal net worth but if you’ve got everything tied into the equity in your home it starts to reduce your choices as you get closer to retirement.

One convenient way for young people to save for retirement is through a systematic withdrawal program, making monthly contributions-- No matter how much money you make now or in the future each dollar will help. The program can be as simple as contributing monthly to your employer’s defined contribution or Group RSP where there may be an employer matching program. You should start looking at these programs before looking at buying a home and putting strain on your pay check.

Another savings vehicle is a Registered Retirement Savings (RRSP) which provides a tax incentive for savings through tax sheltered growth and tax-deductibility. Typically, when you file your return, you will receive a tax refund at the end of the year. You can use these funds to make additional RSP contributions or use the refund as an extra payment against your mortgage.

You will hear people say that you should save ten percent of your income and pay yourself first. While I agree that you need to pay yourself first and the ten percent is a great starting point, it may not be the right percentage for everyone. Everyone’s circumstances are different so you need to make sure you are comfortable with the amount you put away as it could be more or less. They key thing is to put something into a saving plan each month and create the habits. I tell my daughter and our clients, you can increase the amount over time and as you get a raise so does your savings plans.

When we talk about diversification, an excellent way to achieve this is through Mutual Funds. They are a great way for an individual to start getting exposure to equities which over the longer term have provided a better return than buying investments such as Guaranteed Investment Certificates (GIC’s) or putting money in a savings account.

If you have any questions or would like a review of your current investments, please call 778-478-9759, or e-mail [email protected]

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.

If you have been living or working in the United States you would likely have accumulated some retirement savings while employed. Now that you have returned to Canada, the question becomes should I transfer the retirement savings that has accumulated to a Canadian RRSP?

Overview of the US Retirement Plans

Typically there are two types of retirement plans that you would have contributed to.—a 401 (k) plan and an individual Retirement Account (IRA)

401 (k) is an employer sponsored pension plan that is typically funded by both the employer and the employee. Contributions to the plan are redirected from your pre-tax income and the funds can grow tax free until withdrawn.

The IRA is similar to the Canadian RRSP and allows you to make tax deductible contributions while the earnings are tax deferred until withdrawn.

Transfer of a 401 (k) Plan to an RRSP

Canadian tax law will permit you as a resident living in Canada to transfer a foreign pension plan, such as a 401 (k) plan to a RRSP on a tax deferred basis. In order to do this certain conditions with respect to the payment being transferred must be met:

The payment from the plan must be a lump sum amount,

The payment relates to services rendered by you, your spouse or former spouse during the period in which you were a non resident of Canada,

The payment must be fully table in Canada and included in your income in the year of transfer; and

The amount transferred must be designated as a transfer on Schedule 7 of your Canadian income tax return in the year of transfer in order to obtain an offsetting deduction from the income inclusion.

As this is considered a transfer, the RRSP contribution does not impact your RRSP room and is in addition to your regular RRSP room. The transfer payment can only be contributed to your RRSP and not to a spousal RRSP. In addition, upon the transfer of the funds, the contribution and corresponding deduction can only be made in the year or within 60 days after the end of the year that the payment is reported in your income. I.e. there is no carry forward deduction available)

Although a tax rollover from a 401 (k) plan is available, it is important to be aware of the US tax consequences in connection with the transfer. In the US, a taxable distribution from a 401 (k) plan is subject to a mandatory withholding tax of at least 15% and perhaps as high as 30%. The US withholding tax on the withdrawal would be eligible to be claimed as a foreign tax credit or similar deduction when filing your Canadian income tax return; however, this means that only a portion of the withdrawal will be available for an RSP contribution in the year of transfer. Therefore, it will be necessary for you to come up with the additional funds from other sources in order to make up the difference to fully offset the income inclusion on the transfer.

Additional considerations are the consequences associated with an early withdrawal from the plan. If you are under the age of 50 and a half at the time of the withdrawal, the funds may be subject to a further 10 percent early withdrawal tax. Until recently, this amount was particularly punitive as the Canadian Revenue Agency disallowed the portion of the foreign tax credit pertaining to the 10 per cent early withdrawal tax. However CRA has since reviewed its position and has determined this 10 per cent additional tax will be eligible for the purpose of computing the foreign tax credit. While the change in CRA’s position is favorable, planning may be required to maximize your ability to use the additional foreign tax credits earned. This should be an important consideration when making the decision to transfer the plan to Canada.

Transfer of an IRA to an RRSP

Under Canadian tax law an IRA is considered to be a foreign retirement arrangement. The rules and consequences for transferring an IRA to an RRSP are very similar to the 401 (k) plan transfer rules. One important distinction, however involves the concept of an eligible amount. For the purpose of transferring an amount from an IRA to an RRSP, an eligible amount is an amount included in income, received as a lump sum and derived from contributions made to the plan by either you or your spouse/former spouse. Any contributions made to the plan by your employer would not be eligible to be transferred to an RRSP and deducted from your income.

It should also be noted that there is no requirement for you to be a non resident for your contributions to an IRA to be considered as an eligible amount. As well the case with the transfer from a 401 (k) plan to an RRSP, the taxable amount transferred from an IRA to an RRSP will be subject to withholding taxes which will be eligible for the foreign tax credit or similar deduction when filing your Canadian income tax return. Similarly, the early withdrawal tax is eligible for the purpose of computing your foreign tax credit.

Transfer of a 401 (k) Plan to an IRA to an RRSP

If your 401 (k) plan is not eligible for a roll over directly to an RRSP because the benefits were not attributable to services rendered by you or your spouse while a non resident in Canada) it can be rolled into an IRA that qualifies for a transfer to an RRSP. Subsequent to this, the new IRA can be transferred to an RRSP on a tax deferred basis provided the conditions required for a transfer from an IRA to and RRSP as outlined above are satisfied.

If you have any questions or would like a review of your current investments, please call 778-478-9759, or e-mail [email protected]

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.

Kevin J. Zakus has over a decade of experience in Financial and Investment Planning. He has a diverse practice which includes individuals and families starting the financial planning process, to established individuals and corporations requiring more complex planning.

Most recently Kevin served as a Branch Manager and Financial Consultant with a National Financial Planning Firm in their Calgary and Kelowna Offices. In 2006 Kevin and his family relocated to Kelowna where he continues to build his practice and spend time with his family.

When he is not meeting with clients, Kevin and his wife Julie, try to keep up with their four children and the many activities they are involved in. When they aren't running kids from one event to another, they enjoy spending time boating on Okanagan Lake, travelling, horseback riding and touring local wineries.